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Israel’s Vital Tech Sector to Gain From Return of Army Reservists
Employees of StoreDot, an Israeli company that has developed extreme fast charging electric vehicle batteries, work in a laboratory in Herzliya, Israel, Oct. 2, 2023. Photo: REUTERS/Amir Cohen
Israel‘s wartime economy will get a much-awaited boost as the military gradually releases reservists fighting in the Gaza Strip so they can return to their jobs and jump-start softening growth.
Since the Oct. 7 attacks by the Palestinian terrorist group Hamas, more than 300,000 Israelis were drafted to reserve duty — many coming from the globally-important high-tech sector — leading to labor shortages and a gloomy national mood that hurt consumer spending and is expected to dent economic growth.
After nearly three months of intense air bombardment and a massive ground incursion, Israeli leaders have hinted that the war is entering a new phase, with a shift towards more targeted operations aimed at eliminating the Islamist group that rules Gaza and rescuing Israeli hostages.
The military accordingly is adjusting deployment plans for its forces in Gaza and other hot spots, first and foremost by starting to send reservists home — at least for a while.
It declined to share specifics about its number of forces, but said the move will “significantly alleviate economic burdens and enable them to gather strength for upcoming activities in the next year, as the fighting will persist, and their services will still be needed.”
Prior to the war, Israel was headed for solid economic growth of 3.4 percent in 2023 and 3 percent in 2024, according to the central bank. Now, the economy is headed for a fourth-quarter contraction and the Bank of Israel sees 2 percent growth this year and next, or zero growth per capita given Israel‘s fast-growing population.
Erel Margalit, who heads one of Israel‘s most active venture capital firms, Jerusalem Venture Partners (JVP), said the military made a calculated decision.
“They understand you need to go release people to go back to work because going back to work makes Israel stronger,” Margalit said. “Israel is not only strong militarily.”
START-UPS
With inflation easing, the Bank of Israel cut short-term borrowing rates by 25 basis points to 4.5 percent on Monday, its first reduction in nearly four years. The central bank’s policy makers are keeping an eye on the military’s strategy.
The release of reservists will benefit consumer spending, said deputy central bank chief Andrew Abir, which accounts for more than 50 percent of total economic activity.
“People were called up with no warning. In the first month, there was a real mess, because they were in the middle of projects,” Abir told Reuters, referring mainly to high-tech firms.
Spouses who may have been caring for their families alone since October will also be able to return fully to their employment, he said. This is good news for the high-tech sector, which accounts for 12 percent of employment, more than half of Israel‘s exports, 25 percent of income taxes, and nearly a fifth of its overall economic output.
Other signs of economic recovery in real-time data are emerging. Credit card purchases have returned to pre-war levels, Abir said, in “a sign the economy is functioning again.”
Foreign investment, while it has slowed, has not dried up. Startups raised $1.5 billion in the final three months of 2023 in 75 deals, according to data published last week. In 2023, funding fell to $7 billion from $16 billion in 2022.
Geopolitical risks may be off-putting, but they also offer a bigger potential upside, said JVP’s Margalit.
“There are some very good deals to be had,” he said.
Larger, well-funded tech firms have mostly weathered the war, and some have even thrived. Smaller companies, especially those that were hoping to close early financing rounds when the war broke out, have had a harder time.
In some cases, Margalit said, JVP and partner investors have had to inject more funds into these firms in order to “extend the runway.”
STATE SUPPORT
Pini Yakuel, CEO of marketing data firm Optimove, said they saw strong growth in the fourth-quarter despite having 41 of 240 workers in Tel Aviv drafted for reserve duty.
“We’ve adapted. It’s a new reality,” he said. “We just kind of, like, pressed on. Focused on what’s most important. Some things were paused, some things were delayed, but you continue to execute.”
His company put non-critical projects on hold and relied on offices abroad to help cover the load. And things will get easier as the absent employees slowly return.
“I notice in the office: ‘Oh hey, you’re back.’ ‘Yeah, I’m back.’ ‘Is it for good?’ ‘No, for the next month. Then they’re gonna tell us if we need to go back [to the reserves] or not’.”
The government took steps to protect the sector. State-funded Israel Innovation Authority set up a $100 million fund to help early stage startups.
In its recent survey, half of young companies only had sufficient funding for six months, said Dror Bin, the authority’s CEO. His fund has invested about $41 million so far.
“We all got our act together,” Bin said. “CEOs and employees realized that if they want to sustain the company’s success and their jobs they needed to refocus themselves on work.
“Despite all the empathy we get from the tech industry globally, at the end of the day when customers abroad need to get deliveries they can’t say that they didn’t get the deliveries because of the war in Israel,” he said.
($1 = 3.6437 shekels)
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Israel to Issue 54,000 Call-Up Notices to Ultra-Orthodox Students
Haredi Jewish men look at the scene of an explosion at a bus stop in Jerusalem, Israel, on Nov. 23, 2022. Photo: Reuters/Ammar Awad
Israel’s military said it would issue 54,000 call-up notices to ultra-Orthodox Jewish seminary students following a Supreme Court ruling mandating their conscription and amid growing pressure from reservists stretched by extended deployments.
The Supreme Court ruling last year overturned a decades-old exemption for ultra-Orthodox students, a policy established when the community comprised a far smaller segment of the population than the 13 percent it represents today.
Military service is compulsory for most Israeli Jews from the age of 18, lasting 24-32 months, with additional reserve duty in subsequent years. Members of Israel’s 21 percent Arab population are mostly exempt, though some do serve.
A statement by the military spokesperson confirmed the orders on Sunday just as local media reported legislative efforts by two ultra-Orthodox parties in Prime Minister Benjamin Netanyahu’s coalition to craft a compromise.
The exemption issue has grown more contentious as Israel’s armed forces in recent years have faced strains from simultaneous engagements with Hamas in Gaza, Hezbollah in Lebanon, Houthis in Yemen, and Iran.
Ultra-Orthodox leaders in Netanyahu’s brittle coalition have voiced concerns that integrating seminary students into military units alongside secular Israelis, including women, could jeopardize their religious identity.
The military statement promised to ensure conditions that respect the ultra-Orthodox way of life and to develop additional programs to support their integration into the military. It said the notices would go out this month.
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Influential Far-Right Minister Lashes out at Netanyahu Over Gaza War Policy
Israeli Finance Minister Bezalel Smotrich attends an inauguration event for Israel’s new light rail line for the Tel Aviv metropolitan area, in Petah Tikva, Israel, Aug. 17, 2023. Photo: REUTERS/Amir Cohen
Israel’s far-right Finance Minister Bezalel Smotrich sharply criticized on Sunday a cabinet decision to allow some aid into Gaza as a “grave mistake” that he said would benefit the terrorist group Hamas.
Smotrich also accused Prime Minister Benjamin Netanyahu of failing to ensure that Israel’s military is following government directives in prosecuting the war against Hamas in Gaza. He said he was considering his “next steps” but stopped short of explicitly threatening to quit the coalition.
Smotrich’s comments come a day before Netanyahu is due to hold talks in Washington with President Donald Trump on a US-backed proposal for a 60-day Gaza ceasefire.
“… the cabinet and the Prime Minister made a grave mistake yesterday in approving the entry of aid through a route that also benefits Hamas,” Smotrich said on X, arguing that the aid would ultimately reach the Islamist group and serve as “logistical support for the enemy during wartime”.
The Israeli government has not announced any changes to its aid policy in Gaza. Israeli media reported that the government had voted to allow additional aid to enter northern Gaza.
The prime minister’s office did not immediately respond to a Reuters request for comment. The military declined to comment.
Israel accuses Hamas of stealing aid for its own fighters or to sell to finance its operations, an accusation Hamas denies. Gaza is in the grip of a humanitarian catastrophe, with conditions threatening to push nearly a half a million people into famine within months, according to U.N. estimates.
Israel in May partially lifted a nearly three-month blockade on aid. Two Israeli officials said on June 27 the government had temporarily stopped aid from entering north Gaza.
PRESSURE
Public pressure in Israel is mounting on Netanyahu to secure a permanent ceasefire, a move opposed by some hardline members of his right-wing coalition. An Israeli team left for Qatar on Sunday for talks on a possible Gaza hostage and ceasefire deal.
Smotrich, who in January threatened to withdraw his Religious Zionism party from the government if Israel agreed to a complete end to the war before having achieved its objectives, did not mention the ceasefire in his criticism of Netanyahu.
The right-wing coalition holds a slim parliamentary majority, although some opposition lawmakers have offered to support the government from collapsing if a ceasefire is agreed.
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Australia Police Charge Man Over Alleged Arson on Melbourne Synagogue
Australia’s Prime Minister Anthony Albanese speaks to the media during a press conference with New Zealand’s Prime Minister Christopher Luxon at the Australian Parliament House in Canberra, Australia, Aug. 16, 2024. Photo: REUTERS/Tracey Nearmy
Australian police have charged a man in connection with an alleged arson attack on a Melbourne synagogue with worshippers in the building, the latest in a series of incidents targeting the nation’s Jewish community.
There were no injuries to the 20 people inside the East Melbourne Synagogue, who fled from the fire on Friday night. Firefighters extinguished the blaze in the capital of Victoria state.
Australia has experienced several antisemitic incidents since the start of the Israel-Gaza war in October 2023.
Counter-terrorism detectives late on Saturday arrested the 34-year-old resident of Sydney, capital of neighboring New South Wales, charging him with offenses including criminal damage by fire, police said.
“The man allegedly poured a flammable liquid on the front door of the building and set it on fire before fleeing the scene,” police said in a statement.
The suspect, whom the authorities declined to identify, was remanded in custody after his case was heard at Melbourne Magistrates Court on Sunday and no application was made for bail, the Australian Broadcasting Corp reported.
Authorities are investigating whether the synagogue fire was linked to a disturbance on Friday night at an Israeli restaurant in Melbourne, in which one person was arrested for hindering police.
The restaurant was extensively damaged, according to the Executive Council of Australian Jewry, an umbrella group for Australia’s Jews.
It said the fire at the synagogue, one of Melbourne’s oldest, was set as those inside sat down to Sabbath dinner.
Israeli President Isaac Herzog went on X to “condemn outright the vile arson attack targeting Jews in Melbourne’s historic and oldest synagogue on the Sabbath, and on an Israeli restaurant where people had come to enjoy a meal together”.
“This is not the first such attack in Australia in recent months. But it must be the last,” Herzog said.
Israeli Prime Minister Benjamin Netanyahu described the incidents as “severe hate crimes” that he viewed “with utmost gravity.” “The State of Israel will continue to stand alongside the Australian Jewish community,” Netanyahu said on X.
Australian Prime Minister Anthony Albanese late on Saturday described the alleged arson, which comes seven months after another synagogue in Melbourne was targeted by arsonists, as shocking and said those responsible should face the law’s full force.
“My Government will provide all necessary support toward this effort,” Albanese posted on X.
Homes, schools, synagogues and vehicles in Australia have been targeted by antisemitic vandalism and arson. The incidents included a fake plan by organized crime to attack a Sydney synagogue using a caravan of explosives in order to divert police resources, police said in March.
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